Image courtesy Senior Housing Solutions

CAPITAL IDEAS: Advising seniors

Dalton — When I work with a business owner to improve their company, one of my main points is that whatever your industry looks like today will be much, if not totally, different in the not-too-distant future. Whether you, my dear reader, are a business owner or valued employee looking to climb the corporate ladder, it is of value to you see this pseudo-physician heal thyself.

Peter Coughlin, my co-worker, has the Certified Senior Advisor designation. Scott Little, also a co-worker, is a Certified Elder Planning Specialist.

Senior advisor: This is a thing nowadays. I mean, it makes sense that it’s a thing. But, my, how the investment management industry has changed since I got into it I the mid ‘90s. For one, it’s not just investment management anymore. If all you want today is investment advice, you don’t even need to talk to a financial advisor, as exampled by the rapid proliferation of “robo-advisors” (an online service that provides automated investment services including allocation and tax-loss harvesting) such as Wealth-E, Betterment or Schwab’s Intelligent Advisory. More and more people are realizing that human financial advisors are not necessary for investment selection. Robots are literally taking our jobs, at least when it comes to picking stocks, bonds or mutual funds.

The way we do business in every industry is changing rapidly. We’re all very aware of this, but we usually look at it through the lens of the corporations, and we label the companies doing business differently as “disruptors.” While it’s true in some instances that innovators are changing the industry by creating a demand that wasn’t there before (think Apple’s iPod), mostly, the way of doing business has changed in response to new or growing consumer demands.

Peter’s CSA and Scott’s CEPS designations are examples of an industry changing due to these new and growing consumer demands. The Society of Certified Senior Advisors has an audience of people age 55-plus who are now (or soonish) embarking on the journey of aging, including both the physical and cognitive changes, but also the new financial changes that require more than mere investment selection. Obviously that includes such things as filing and collecting Social Security and Medicare, as well as actively being involved with implementing an estate plan that allows you to prepare your heirs for their inheritance in a manner that carries on your legacy and wishes in a way that you’d approve of. But there are other problems that require solutions, problems not well considered because they seem too far off or, frankly, are too scary to consider.

As an acknowledgement of these concerns, in March 2017, the Securities Exchange Commission created a new rule to protect senior investors. As reported by the Association of Certified Financial Crime Specialists Feb. 23, 2018, there was an historic coordinated sweep by federal authorities arresting “more than 250 defendants who alleged to have victimized more than a million Americans, mostly elderly, to the tune of more than $500 million.” Clearly we are not overstating the depth and breadth of the concern.

Even at our firm, we’ve stopped two attempts. For one client, we noticed an increased pace of withdrawals. We called the client to question them on it and she assured us it was OK. When the withdrawals continued, we made the client sit down with us and go through the withdrawals. It turned out that her caretaker, who had access to the account, was being a less-than-forthright steward of that client’s money.

Then we had one imposter call our office with a cloned phone number and personal account information at the ready to make a withdrawal. Admittedly, this was a client that lived 1,000 miles away and we had never even met personally, so the telephone call itself wasn’t at all a red flag. But the advisor on the line, Scott, the CEPS, picked up on a few things and knew something wasn’t kosher. (His story can be found here.)

Some of these brazen criminals are getting more sophisticated, for sure. But another part of the concern is that our seniors are facing growing rates of mild cognitive impairment and dementia. I know that it’s not a fact that any of us like to admit, that it could happen to us. But it could happen to you, your parents or even your siblings. I know it sounds offensive to some, but as we age, we need more‑not less—protection. The older we get, the more likely we are to make mistakes, and the more susceptible we are to fraud.

Another example of a rapidly changing industry is the need for longevity planning. The good news is that people are living longer. But that’s also the bad news, as your risk of running out of money increases. According to the Fidelity Retiree Health Care Cost Estimate, “an average retired couple age 65 in 2018 may need approximately $280,000 (after tax) to cover health care expenses in retirement.” A Harvard University study revealed that 60 percent of the 1.5 million people who filed bankruptcy annually did so for unexpected medical bills. Surprisingly, 75 percent of those bankruptcies were filed by people who had medical insurance before the illness or injury.

This is a relatively new problem, given the longevity issue as well as the fact that the pace of medical inflation has far surpassed that of overall inflation. New problems require new solutions. But too many seniors are using the old-fashioned method of going to all cash to protect their assets, but then their purchasing power is eroded by inflation. The other old-fashioned method is trying to invest more aggressively, with far more risk than they need, thinking they need to build their portfolios even faster. If it was snowing out, and you could get to where you need to be on time by driving 40 mph, why would you risk driving 70? Yes, correctly navigating the myriad of options for Medicare as well as routinely reviewing your choices is part of your senior financial GPS. But that’s only part of it. You also need to determine which accounts to add to or withdraw from given your particular situation. A health savings account? Your dedicated trust account? Once upon a time and, unfortunately, still too often, instead of planning what to do with their money, seniors will look to a new type of investment strategy, but investment selection is not a plan.

The list of new problems seniors need advising on is longer than diminished cognitive abilities and the risk of longevity. Widowhood is a major disruptor when a) the couple relies heavily on Social Security benefits for income and the other spouse was the largest income earner; or b) too many assets, usually a business, is titled in the husband’s name and no succession plan exists. Sometimes parents need to contend with the financial struggle of adult children returning home, not to mention hospice or palliative care, or end-of-life choices.

I am a business owner who works with business owners to determine how to best position their companies to prepare for the way the industry is going to look, as opposed to doing what they’ve always done. I’ll frequently give you my assessment of the markets and the economy in Capital Ideas, but you definitely don’t need me—or any human financial advisor—when it comes to investing. Financial advisors are practically useless in that regard. The purpose of any business is not to help customers with what they can do by themselves (of course, unless they just don’t want to), but to help the customers find solutions to problems they didn’t even know existed.


Allen Harris, the author of ‘Build It, Sell It, Profit: Taking Care of Business Today to Get Top Dollar When You Retire,’ is a Certified Value Growth Advisor and Certified Exit Planning Advisor for business owners. He is the owner of Berkshire Money Management in Dalton, managing investments of more than $400 million. His forecasts and opinions are purely his own. None of the information presented here should be construed as individualized investment advice, an endorsement of Berkshire Money Management or a solicitation to become a client of Berkshire Money Management. Direct inquiries to